Londonderry Company’s Widget Plant produces widgets forindustrial use. The plant uses a standard cost system with thefollowing standard variable cost per widget.
StandardQty StandardPrice
orHours orRate
Standard Cost
DirectMaterials………………………… 4.0pounds $2.50 perpound
DirectLabor………………………………. 0.6hours $9.00 perhour
During April, the plant produced 5,000 widgets and incurred thefollowing costs:
a. Purchased and used 20,000 pounds of materials at a cost of$2.95 per pound.
b. Worked 3,600 direct labor hours at a cost of $8.70 perhour.
Required: (use the variance analysis template, ifdesired)
1. Compute the following variances for April:
a. Direct materials price and quantity variances.
b. Direct labor rate and efficiency variances.
2. Pick out the two most significant variances that you computed above(there are four in total). Explain possible causes for thesevariances.
